DHL: Asia too
dependent on the West
ASIAN governments need to
re-balance their economies as they are currently too dependent on
the West, according to a study commissioned by DHL and undertaken by
the Economist Intelligence Unit.
“Much of Asia has grown up on the
back of vibrant trade with the West,” said Justin Wood, a director
at the Economist Intelligence Unit and South-East Asia expert.
“But with the economies of North
America and Europe forecast to perform poorly next year, the impact
on Asia’s trade-dependent economies could be serious indeed.”
The study, entitled: Fuelling
Global Trade: How GDP growth and oil prices affect international
trade flows, also revealed the slowing Asian growth story and
the need to re-balance their economies, said Frank Appel, the CEO of
Deutsche Post World Net, the parent company of DHL.
“The challenge that Asian trade
faces today is to hasten the migration to high value goods and focus
on managing their growing dependence on oil.”
“The impact of rising oil prices
will add risks and negatively impact Asian international trade,”
Appel continued. “The study also reveals that for 2009 and beyond,
international trade will depend more on rising Asian incomes, than
The study examined trade flows
between 39 countries in three regions - Asia, the European Union and
the North America Free Trade Agreement (NAFTA).
It included three countries under
NAFTA- the US, Canada and Mexico, 25 European Union countries, the
six largest economies in ASEAN along with Japan, South Korea, India,
China and Hong Kong in Asia.
The report looked at the bilateral
trade flows between each country and those outside its immediate
trade bloc or region, which resulted in 383 bilateral trade
According to the study, the link
between income and trade is stronger between Asia and the West than
between North America and Europe.
A 1% increase in combined income
between an Asian country and a Western country will deliver a 1.36%
increase in trade.
Trade between ASEAN and the West
will rise 1.35% for every 1% increase in combined income, while
between two Western countries, a 1% increase in combined income
delivers a 1.14% increase in trade.
“Equally, with oil prices showing
extreme volatility this year, and with the price of oil likely to
rise after the current economic downturn passes, this study
identifies further challenges for Asian nations to address,
especially in terms of pushing their manufacturing industries up the
value chain,” Wood said.
Based on an average of all the 383
bilateral trade relationships in the study, a 1% increase in oil
price leads to a 0.24% reduction in trade, with the assumption that
all other drivers, such as income levels in two countries, remaining
High oil prices have the greatest
effect on Southeast Asia, where trade decreases the most.
The impact on oil prices is much
greater when an ASEAN country trades with a nation in the EU or
NAFTA , a 1% increase in the price of oil reduces the value of trade
by 0.3%. Assuming no rise in income levels, the value of trade
between ASEAN and the West would fall by 30% over five years if oil
prices doubled, as had happened in middle of this year.
In West-to-West trade, there is a
higher proportion of “high-value” goods such as computers, aircraft
and media devices, and a smaller share of “low-value” goods such as
coal and gas, palm oil, textiles and shoes.
In contrast, Asian nations are
likely to have a much higher proportion of trade centred on
Since transport costs make up a
larger share of the final cost of low-value goods than they do for
high-value goods, rising oil prices have a larger impact on trade
growth for Asia.